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INSTALLMENT AGREEMENTS ELIGIBLE FOR STREAMLINING

The
IRS doubled the maximum unpaid assessment balance qualifying for its
streamlined installment agreement program for certain taxpayers and
extended the time for payment (SBSE
05-0112-013). The new maximum balance is $50,000, and the time
for full payment is extended from 60 months to 72 months.

Only
individuals and out-of-business sole proprietors will qualify for a
streamlined installment agreement when the unpaid balance of
assessment is $25,001 to $50,000. Individuals, businesses that file
Form 1120,
U.S. Corporation Income Tax Return, and other types of
businesses that are out of business can qualify for a streamlined
installment agreement for income taxes if their unpaid balance of
assessment is $25,000 or less.

All
agreements for unpaid balances of more than $25,000 must be
established as direct debit installment agreements.

REGS.
FINALIZED ON PERSONAL INJURY DAMAGES

The
IRS issued final regulations relating to the exclusion from gross
income for damages received on account of physical injuries or
sickness (T.D. 9573). The regulations remove the requirement
that damages received from a legal suit, action or settlement be
based on “tort or tort type rights” to be excludable. The final
regulations adopt without substantive change those proposed in 2009
(REG-127270-06).

Sec.
104 limits exclusion from income for damages to those received
for “personal physical injuries or physical sickness.” The original
regulations that the IRS issued under Sec. 104 required that, to be
excludable, the damages had to be based on “tort or tort type
rights” (Regs. Sec. 1.104-1(c)), which was intended to distinguish
between damages for personal injuries and other types of damages,
such as those for breach of contract.

The
IRS explained in the preamble to the latest final regulations that
there is no need to limit the type of action because Sec. 104(a)(2)
limits the exclusion to damages for personal physical injury or
physical sickness. The regulations also permit the exclusion of
damages for emotional distress to the extent the emotional distress
is attributable to a physical injury or physical sickness and permit
the exclusion of damages that do not exceed the amount paid for
medical care for emotional distress (Regs.
Sec. 1.104-1(c)(1)).

NOTED
IN PASSING

The Tax Court erred last year in
allowing a minister to exclude from income a portion of his housing
allowance allocable to a second home, the Eleventh Circuit held.

A
divided Tax Court had ruled 7–6 (see “Tax
Matters: Second Home Eligible for Parsonage Exclusion,” April
2011, page 53) that the minister (and Grammy award-winning
trumpeter), Philip Driscoll, could exclude the full housing
allowance he received to cover both his principal residence and a
lake house. The majority relied on the Dictionary Act (1
U.S.C.§ 1) to interpret the exclusion from income under Sec.
107(2) of amounts paid a minister “to rent or provide a home” as
referring to any home, not just one.

In
rejecting that reading, the Eleventh Circuit (Driscoll,
No. 11-12454 (11th Cir. 2/8/12)) said the dictionary meanings
of “a” and “home” had a singular connotation. The court noted that
“the consistent use of the singular in this legislative history— ‘a
dwelling house,’ ‘a home,’ and ‘the home’—demonstrate that Congress
intended for the parsonage allowance exclusion to apply to only one
home.” The court asserted that the general rule that an exclusion
should be narrowly interpreted did not support the expansive reading
of the provision for which the taxpayers argued.

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